CROATIA Law and Practice Contributed by: Iva Basarić, Marija Gregorić and Matija Skender, Babic & Partners
processes, manufacturing technologies, etc). Lastly, Croatian companies are also able to defer taxation on a step-up in value of depreciable assets, but only in relation to intragroup restructuring. Considering that the anti-evasion regimes applicable in Croatia create very complex terrain for tax plan - ning, such analyses are created on a case-by-case basis and in close co-operation with tax advisers and experts. 9.4 Tax on Sale or Other Dispositions of FDI Capital gains derived from the sale of financial assets – for example, shares (a business quota in Croatian LLCs), stock, financial market instruments, deriva - tives, etc – is taxed as income of both resident and non-resident individuals (ie, the disposal of financial assets by legal entities is not subject to capital gains tax). The applicable tax rate is set at 12%. The tax basis is calculated as the difference between the capi - tal gains and capital losses occurring within the same calendar year. The taxpayer is under an obligation to pay capital gains tax until the end of February in the previous year. There are a number of exceptions related to the pay - ment of capital gains tax. Most notably, capital gains tax will not be paid in case of: • the transfer of financial instruments between spouses and immediate family; • the inheritance of financial instruments; and • the disposal of financial instruments more than two years from the day on which the financial instru - ment was acquired. 9.5 Anti-Evasion Regimes In addition to any general anti-avoidance rule (the denial of tax benefits for arrangements that do not have economic substance) and the punitive withhold - ing tax rate for non-cooperative jurisdictions (both described in 9.2 Withholding Taxes on Dividends, Interest, Etc ), Croatia is also following the anti-avoid - ance trends at the European and global levels. In this regard, Croatia has implemented the anti-hybrid mis - matching rules of the Anti-Tax Avoidance Directive (ATAD) 2, as well as introducing the BEPS Multilateral Instrument (MLI) measures. In addition, Croatian law
has been populated with the provisions originating in the OECD’s Transfer Pricing Guidelines. Finally, Croa - tia has also implemented Directive on Administrative Cooperation (DAC) 6, creating stronger ties between the Croatian Tax Authority and its European counter - parts, thus facilitating anti-tax evasion activities and diligence. 10. Employment and Labour 10.1 Employment and Labour Framework The Employment Act and Other Sources In Croatia, employment and labour matters are primar - ily governed by the Employment Act, complemented by the Croatian Constitution, International Labour Organization conventions, additional statutes (eg, the Work Safety Act, Minimum Wage Act, Prevention of Discrimination Act and Gender Equality Act), col - lective labour agreements (CLAs), shop agreements with works councils, company policies and individual employment contracts. The Employment Act ensures employees’ minimum rights, overriding any agreement or policy that falls below these standards. In cases of conflict, the document favouring employees will prevail. Collective Bargaining Bodies Collective bargaining, works council and labour union arrangements are less common in Croatia compared to other EU countries. No universal CLA applies nationwide, but a CLA for trade is applicable to almost all enterprises engaged in wholesale and retail, and is consequently very widespread. Collective bargain - ing is prevalent in the public sector, specific indus - tries (construction, accommodation, catering, forest products), and large private enterprises with historical union ties. Unions with at least five members in a company may appoint a union trustee. Establishment of a works council, which can be initiated by a union or 20% of employees in companies with at least 20 staff, is a workforce prerogative. If there is a works council or a union trustee, specific collective engagement require - ments, ranging from providing information and prior consultation to pre-approvals, will apply with regard to a number of actions including, for example, dismiss -
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